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Signet Jewelers(SIG - Get Report) has the mid-tier U.S. jewelry market wrapped up making it a viable force against Tiffany(TIF). The Hamilton, Bermuda-based company owns the popular Jared The Galleria of Jewelry and Kay Jewelers brands. Recently, Signet bought its competitor, Zales, for $1.46 billion, with the deal closing on May 29.

The combined company has more than $6 billion in annual sales, Signet said in May. Between its U.S. operations of Kay and Jared, the retailer owns 1,400 stores, a number that will rise to 3,000 in the U.S. and Canada between Zales and its kiosk brands, People's and Piercing Pagoda. The company also has about 500 stores in the U.K. under H.Samuel and Ernest Jones brands.

The Zales transaction is expected to be accretive to earnings in the first fiscal year by a "high-single-digit percentage," excluding any one-time costs associated with the acquisition, Signet said. Additionally the company expects roughly $100 million of "synergy potential" by the end of 2018, which includes $50 million of savings due to "improved product sourcing and purchasing leading to cost improvement;" $30 million of revenue benefit split between repair services and incremental margin from brand cross-selling; and $20 million of cost reductions in SG&A expenses, it said.

Sterne Agee analyst Ike Boruchow had Signet as his top stock pick, following meetings with Signet's management and rates the company at "buy."

Boruchow believes the company can obtain more than management's $100-million target in cost savings and additional revenue over three years. "While potential cost savings may be slow to develop (as SIG doesn't want to disrupt ZLC's current operations) several areas were not accounted for when the initial target was issued, specifically: savings on rent, headcount reductions/pairing field operations roles, DC consolidation,opportunities with the Vera Wang brand, and closure of the ZLC Texas headquarters," he wrote in a June 30 note to clients. "While that is not to say that all of the above will take place, it certainly illustrates where upside could originate."

Boruchow also expects the company to close approximately 200 under-performing Zales stores over the next four years, which would benefit earnings by 15-20 cents a share. "Once the closure program is complete, management will resume growing footage at the Zales brand, with off-mall locations providing the largest opportunity."